Carbon Finance and Land Tenure Lessons from Sub-Saharan Africa

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1 Carbon Finance and Land Tenure Lessons from Sub-Saharan Africa Andre Aquino Andre Aasrud Leticia Guimaraes 2 nd World Agroforestry Conference Nairobi, August 24, 2009 Work in progress Harnessing the carbon market to sustain ecosystems and alleviate poverty

2 Objective Objective of the study: Investigate how carbon finance projects in the area of land use may affect land tenure security Main hypothesis of the paper: Carbon Finance in the area of land use (forestry, agriculture) can contribute to the process of land tenure securitization to those landholders and communities participating in the carbon finance project. Methodology: Literature review, case studies through primary data analysis and field visits

3 Theoretical framework How carbon finance affects land tenure security What carbon investors are seeking in carbon operations? Mitigate risks to investment a) Clarity of carbon ownership (legality of entitlement transfer); b) adequate project implementation and permanence of stock carbon over time. A) Carbon ownership clarification Contracts and benefit sharing agreements B) Ensuring adequate implementation and permanence Institutional strengthening (capacity building) and involvement of land agencies in project implementation Spill-over effect from carbon finance operations

4 A) Carbon ownership clarification Clarifying carbon ownership is key in a carbon transaction (especially when market-based) Most countries do not have specific legislation Carbon entitlements are a form of property right that commoditize carbon therefore allowing trading Contracts legal instruments used to clarify carbon ownership ERPA (Emission Reduction Purchase Agreement) legally-binding contract between buyers and sellers of Emission Reductions Subsidiary agreements clarifies the relationship between a carbon aggregator and landholders and communities Benefit sharing schemes how carbon revenues are to be shared among project participants The negotiation process is key and should lead to trust building across community members

5 B) Ensuring adequate implementation and permanence of carbon Institutional strengthening (capacity building) Strengthening and empowering local communities and landholders during project design and implementation Projects support the strengthening of rural institutions Cooperatives in Ethiopia, Grappes in Niger, CFAs in Kenya National land agencies often involved in the project implementation COFO (Tenure Commission) in Niger and PNF (National Tenure Programme) in Madagascar

6 Spill-over effect o National governments have increased incentive to clarify land tenure to receive carbon investments (a type of foreign direct investment) o o As market increases (including for REDD), this may become more important Carbon revenues may also offset some of the costs Governments incur in clarifying land tenure o Individuals and communities have increased incentive to demand land tenure clarification to benefit from potential carbon revenues Demands from communities may lead to action from the government side

7 Case studies

8 Kenya: Community Forestry around Mt. Kenya Land tenure situation in project area: Gazetted KFS land. Community user rights clarified and solidified as part of the project (20 year agreement/license with KFS, renewable twice). KFS ownership rights to project areas and full rights to timber also solidified through project and contract process could be an issue with incentives at the community level to participate in project as user rights are only for non-timber forest products. Carbon ownership clarification: Contracts: Tri-party agreement between Kenya Forest Service (KFS), Green Belt Movement (GBM), and Community Forest Associations (CFAs). Carbon component led to further clarification of user rights, resulting in more comprehensive contracts. Benefit sharing schemes: Not yet fully defined, but agreement that carbon revenues should be used for community purposed benefiting all members to avoid internal conflicts.

9 Kenya: Community Forestry around Mt. Kenya (2) Institutional strengthening: GBM supported establishment of CFAs as well as general social mobilization and capacity building at community level. Spill-over effect: The Government and KFS are now aiming to clarify tenure issues in forest lands in a new national climate policy strategy in order to attract forest carbon revenues (including REDD). Preliminary conclusions: Project has contributed to improved user rights, contract between CFAs and KFS is key in this context. Transaction costs of contractual agreements relatively high and replicating the process for such small-scale projects could be difficult.

10 Niger: Acacia Senegal plantation Land tenure situation in project area: Communal and vacant land. Certificats Fonciers delivered to a number of communities involved in the initiative. Carbon ownership clarification: Carbon aggregator is a private company that signed subsidiary agreements with all communities, represented by a grappe (cooperative) Benefit sharing schemes: Each community defined their own revenue sharing arrangements (clé de répartition de revenus). This included also the revenues from Arabic gum. Institutional strengthening: The project has been providing intense capacity building to the communities involved in the project. During project preparation, the tenure situation in each of the participant communities areas was assessed and recommendations for securitization issued, which were followed up later.

11 Niger: Acacia Senegal plantation (2) Spill-over effect: The National Land Tenure Commission (Commission Fonciere) participates actively in the project implementation. It is clear to government that tenure securitization is a priority for Niger to benefit from carbon opportunities. Preliminary conclusions: Definition of a revenue sharing arrangement by each community is likely not only to reduce conflicts when payments are made but has also led to increased social capital among community members. Local tenure clearer compared to when project started.

12 Preliminary Conclusions (1) Carbon Finance in the land use sector can contribute to securing land tenure to landholders and communities in the project area through the design of appropriate institutional arrangements. Contracts and benefit sharing arrangements can clarify carbon ownership ERPA s strong focus on carbon aggregators and subsidiary agreements is an approach to mitigate risks and can contribute to tenure clarification Rules for good contracts, including the role of carbon aggregator Contracts can be flexible enough to accommodate complex social relations among community members and landholders, including customary rights Clarifying carbon ownership may lead to overall land tenure clarification Carbon entitlement created with a clear ownership arrangement (recognized by the state, then community and peers) land tenure security overall to be increased

13 Preliminary Conclusions (2) Carbon Finance has important spill over effects National governments more willing to address tenure concerns State land agencies are closely associated with project implementation Projects are supporting the implementation of national tenure reforms Carbon finance can lead to security of tenure, but there is a cost! Setting up the institutional arrangements necessary to address unsecure land tenure is time-consuming and resource-intense. Are all carbon investors ready to make this type of investment? What role for safeguards and minimum standards in carbon operations?

14 Preliminary Conclusions (3) How replicable is the BioCF portfolio? Would a pure market mechanism engage these type of community projects? Is there a role for ODA to make this happen? These projects are not the less costly, hence it would not be the first option of the market, unless there are price premiums Towards national legislation over carbon ownership and benefit sharing? National legislation probably to be expected from a national REDD regime, for instance. Experience with projects may influence new legislation. However, locally-specific characteristics need to be taken into account, so that national legislation need to be flexible

15 Thank you! Asante sana! André Aquino